Euro zone banks will get time to come up with a plan to meet capital shortfalls highlighted by shock scenarios in upcoming stress tests, the European Central Bank said on Monday.
"The time frame within which the strengthening of capital buffers must take place will depend on the respective outcome," the ECB said in a statement.
(Read more: ECB to simplify European bad loan definition)
Euro sign outside the European Central Bank, Frankfurt, GermanyImage Source | Image Source | Getty Images
"A shortfall relative to the baseline scenario will require that capital be raised in the nearer term, whereas a shortfall arising from the adverse scenario may only require capital to be raised over a more extended period, on the basis of an agreed capital plan".
The ECB is still working on the methodology for its review of euro zone top lenders' balance sheets, which it plans to publish by the end of March. The review will precede the stress tests that check how banks hold up under shock scenarios.
ECB Vice President Vitor Constancio said preparations were well underway: "Banks are front-loading preparations for the comprehensive assessment, and are strengthening their balance sheets, which is a welcome development."
